We all work today for the common goal of providing ourselves and our loved ones with the basic necessities such as food clothing and shelter. We set aside significant amounts from our monthly paycheck for grocery items, utilities, transportation and mortgage. Some amounts go to our savings account, and some are earmarked for our little indulgences, like fancy clothes, entertainment and a few Friday night outs with friends.
An average working individual almost lives entirely from paycheck to paycheck, leaving only a fraction of his monthly income for contingency needs. While some take on two jobs to expand their means and finance some of life’s luxuries, only a few has given thought to life during retirement.

Retirement – it’s that time in everyone’s lives when most cease to work, and stretch out their arms for anything the government can hand them as a form of compensation for all their hard work, usually in the form of Social Security benefits from years of contributions to the Social Security Administration. But can one simply rely on his Social Security benefits for his retirement? Most financial experts would disagree unanimously. Why? Social Security does not keep up with the rising cost of living. Social Security has been created to augment the retiree’s needs and not cover all the costs of his retirement. To be able to live comfortably during retirement and cover all expenses, including medical costs, one needs to invest in his future now, and not when retirement is just right around the corner.

Fortunately, for those who are forward looking, there is quite a number of investment opportunities designed specifically for retirement. Some of these ‘retirement accounts’ offer anyone who earns monthly income the flexibility of saving up for their future on a regular monthly, quarterly, semi-annual and annual basis. With flexible payment terms, the burden of having to invest lump sum money into a retirement investment fund is easily taken away. One can choose to set aside 10% of his monthly income to go to his retirement account.
Let’s take a look at some of the retirement accounts out there.

IRA

Individual Retirement Account or IRA, is not a term that encompasses all forms of investment accounts. IRAs are investment tools specifically set up to fund the retirement of individual contributors that provide some tax advantages. These include Traditional IRA, Roth IRA, SEP IRA and Simple IRA.

Traditional IRA is a tax-deductible retirement account, which means you can file for an income tax deduction for any contributions you made to your Traditional IRA, depending on some conditions such as your filing status and your income. You may also rollover some assets into your Traditional IRA, such as an asset received from your deceased spouse and employer-sponsored qualified plans like the 403(b) and 457(b), depending on some triggering factors. Withdrawals on Traditional IRAs are taxed as income.

On the other hand, Roth IRA, a retirement account made from after-tax contributions, is usually not taxed upon withdrawal, and contributions to the Roth IRA may not be deducted from your income tax.

Variable life insurance

And who thought life insurance plans only come in handy when the policy holder dies, living his survivors with some substantial amount to go on living? Sure, life insurance can offer some convenient tax shelters and even pay for your estate taxes so your loved ones would not have to lose your precious property to the government. Thanks to the genius of variable life insurance policies, one can now also insure his retirement. Well, not entirely.

Variable life insurance policies allot a portion of your insurance premium to investment instruments such as bonds, stocks, real estate, money market instruments and even precious metals such as gold. The dividends earned from these investments may be used to increase your coverage or be reinvested into the separate investment account associated to the policy. You can then choose to leave your investment to grow over a period of time till retirement and cash in on whatever cash your policy has earned.

The downside? As the bulk of your policy’s premium is invested in the market, the value of your policy could significantly fluctuate. It is a recommended practice to just ignore the short-term market fluctuations and leave your investment to grow over time.
Armed with this information, you can start investing now and stop worrying about how to fund your retirement. Remember, only you can take care of yourself now while you have the capacity to rake in regular income and save up for your future.